In the process of Web3.0 moving from concept to application, digital currency has also gradually evolved from the originally used native digital currency to stablecoins pegged to real-world value. Its technology can be primarily attributed to the integrated financial engineering of blockchain technology, smart contracts, oracle systems, and others working together.

1. Blockchain Technology
   Blockchain is a distributed database technology that connects data blocks in chronological order through a chain structure, forming an immutable "chain." Each block contains a certain number of transaction records and the digital fingerprint (hash function) of that block. Computers that help update, manage, and verify blockchain information are called "nodes." When someone initiates a blockchain transaction, it is broadcast to the entire blockchain network, and each node verifies the transaction. Once verified, the transaction is added and committed to the ledger, forming a chronologically ordered transaction record. Its essence is a "data ledger," where each node maintains a complete copy, recording all data changes, and once written, it cannot be altered.
   Since 2008, blockchain has developed into an innovative technology with broad application prospects, achieving immutability and traceability of data. It provides a new trust-building mechanism for the digital economy era, enables complex decentralized financial applications, and lays the foundation for digital currencies and stablecoins. Blockchain technology constructs a decentralized, immutable, and highly verifiable distributed ledger system. Through consensus mechanisms such as Proof of Work or Proof of Stake, it achieves data consistency in a trustless environment without traditional financial intermediaries, thereby enabling secure currency issuance, transaction confirmation, and asset ownership verification. Simultaneously, encryption algorithms further ensure the authenticity of transaction data and the anonymity of user identities, making blockchain not only a "ledger" for cryptocurrency issuance and circulation but also its "trust infrastructure." For this reason, blockchain is widely regarded as the technical prerequisite and institutional foundation for digital currencies to operate independently of the traditional financial system, and it serves as the most fundamental technical basis for the birth and development of stablecoins.

2. Smart Contracts
   If blockchain is the foundation of encrypted digital currencies, especially stablecoins, then smart contracts are the core tool and automated engine of stablecoins, popularized by Ethereum, and are the most critical technology for stablecoins to achieve their complex mechanisms. The main technical features are:

• Programmability: Smart contracts are program codes deployed on the blockchain that automatically execute when predefined conditions are met. They upgrade currency from simple "digital records" to "programmable assets." All core logic of stablecoins, such as issuance (minting), destruction, collateralization, and liquidation, is defined and executed through smart contract code.

• Automation and Trustlessness: Once deployed, smart contracts run automatically and precisely without any human intervention. This makes it possible to build an automated monetary protocol that does not rely on human credit. For example, in the DAI system, the calculation of collateral ratios and the triggering of liquidation procedures are entirely automated by smart contracts, eliminating the risks and biases of human operation.

• Composability: On smart contract platforms like Ethereum, different smart contracts can call and integrate with each other like Lego bricks. Stablecoins can be seamlessly embedded into various DeFi protocols, becoming underlying assets for applications such as lending, trading, and derivatives, greatly enriching application scenarios.

The popularity and widespread application of smart contracts are driven by standardization. The ERC-20 standard on the Ethereum platform is currently the most widely used smart contract interface standard, defining basic functions such as token transfers and balance queries, enabling seamless interaction between tokens of different projects. However, the ERC-20 standard also has some limitations, such as lacking error-sending protection mechanisms. Therefore, the Ethereum community continues to propose new contract standards, such as ERC-3643 for compliant tokens and ERC-4626 specifically designed for yield-bearing tokens. The execution of smart contracts typically goes through three stages: code writing, contract deployment, and call execution. Developers write contract code using Solidity or other blockchain programming languages, deploy it to the network via blockchain nodes, and users or other contracts trigger execution through transactions. The powerful advantages of smart contracts—automated execution, efficiency, and decentralization—provide transparent, fair, and automated execution support and guarantees for stablecoins to achieve "decentralized" transactions.

3. Oracle Systems
   Oracles are "bridges" that connect blockchains to external real-world data. Blockchain itself is a closed system and cannot directly obtain real-time off-chain data (such as weather, stock prices, event results, etc.). Oracles "feed" external information to smart contracts on the blockchain, enabling smart contracts to execute corresponding logic based on real data. The core function of oracles is to ensure the reliability and security of data, avoiding abnormal execution of smart contracts due to data errors or tampering. The specific working principles are:

• Request Trigger: When a smart contract on the blockchain requires external data, it sends a data request.

• Data Acquisition: Upon receiving the request, the oracle collects relevant data from off-chain data sources such as API interfaces (e.g., financial market data, weather data), sensors (e.g., temperature, location data in the physical world), or manual input.

• Data Processing: To ensure data accuracy and reliability, the oracle processes the data through methods such as data aggregation (e.g., weighted average of ETH/USD prices from multiple exchanges), signature verification (signing data by oracle nodes), and decentralized node consensus (using multiple oracle nodes to jointly verify data).

• On-Chain Transmission: The processed data is written to the blockchain through transactions, becoming on-chain data that can be called by smart contracts, ensuring the data is verified and recognized by other nodes in the blockchain network.

• Contract Execution: After obtaining the external on-chain data, the smart contract executes corresponding operations based on predefined logic. For example, a DeFi lending contract judges whether liquidation conditions are met based on the received price data and automatically triggers the liquidation process if conditions are met.

Based on the direction of data flow, oracles can be divided into two types: input oracles, which bring off-chain data into the blockchain, and output oracles, which transmit on-chain information or event results to off-chain systems, triggering external operations or interactions. With the continuous advancement of oracle technology, its application in stablecoins will become more extensive and precise, further promoting the popularity and innovation of decentralized finance (DeFi). Meanwhile, with the introduction of new technologies such as multi-party protocols and zero-knowledge proofs, oracles will become more secure, fast, and transparent. Blockchain applications like stablecoins will operate in more intelligent and automated systems and establish closer links with the real world.